Economic Activity of Public Bodies (Overseas Matters) Bill

(Limited Text - Ministerial Extracts only)

2nd reading
Tuesday 20th February 2024 Lords Chamber

Moved by

[Baroness Neville-Rolfe]

That the Bill be now read a second time.

[The Minister of State, Cabinet Office (Baroness Neville- Rolfe) (Con)]

My Lords, at a time of increasing global division, the effective communication of the United Kingdom’s foreign policy is vital. In order to achieve our objectives, the nation must speak clearly with one voice. It is for His Majesty’s Government alone to decide the UK’s foreign policy.

I acknowledge that the Bill is being debated at a troubling time. Although some noble Lords may disagree with the Government on certain aspects of this legislation, I hope that everyone in this House will be sensitive to the broader issues with which the Bill deals. It will give effect to an important manifesto commitment. It is vital that public bodies are not allowed to pursue policies, through their investment and procurement decisions, in order to try to legitimise a UK foreign policy that differs from that of HMG.

Some public bodies have tried to declare boycotts and divestment policies that are inconsistent with the foreign policy set by the Government. Local councils have passed motions in support of boycotts. Local government pension schemes are frequently under pressure to divest certain securities. Universities, too, have been pressurised by groups that want to impose their own views about foreign policy.

The campaign that has placed the most pressure on our public bodies is the BDS movement. It deliberately asks public bodies to treat Israel differently from any other country, and its founders have been clear in their opposition to the existence of Israel as a Jewish state. Not only is that at odds with the policy of this Government, which is to promote a two-state solution, but we have seen an increase in anti-Semitic events following on from the activities of the BDS movement. These concerns pre-date the 7 October attacks, but since then the Community Security Trust has recorded the highest-ever number of anti-Semitic incidents, alongside increasing pressure for public bodies to engage in BDS activity.

The provisions in this landmark Bill prohibit public bodies from imposing their own boycotts or divestment campaigns against foreign countries or territories. It is clearly wrong that individuals who have roles of authority in a subordinate public body can act in such ways. It is also wrong that those public bodies can act in a way that, at home, jeopardises community cohesion while sowing confusion among our international allies about UK government policy.

It is particularly noticeable that boycotts and divestment campaigns disproportionately target Israel, especially in recent months in the wake of Hamas’s despicable terror attack and the resulting conflict. These boycotts contribute to the depressing rise of anti-Semitism across the UK, as reported last week by the Community Security Trust, which recorded its highest-ever annual total of anti-Jewish hate across the UK.

This Bill was unamended in the other place. That reflects the care taken in the drafting of this legislation to ensure that it adequately prohibits BDS campaigns in public bodies, applies to the correct public bodies within its scope and provides appropriate enforcement powers. Noble Lords may wish to table amendments in Committee that can improve the Bill, and of course I am open to considering those.

I now turn to the Bill in greater detail. It will prohibit public bodies from implementing boycotts or divestment campaigns against foreign countries and territories that are inconsistent with the legal sanctions, embargoes and restrictions set by HMG. The Bill will apply to public bodies UK-wide. It provides for an enforcement regime with the power to issue compliance notices and to investigate and fine public bodies in breach of the ban.

The main provisions are as follows. The Bill will ban public bodies from considering the country or territory of origin of a product or service, in a way that indicates moral or political disapproval of foreign state conduct, when making a procurement or investment decision. It does not prevent public bodies taking such considerations into account where this is required by formal UK government legal sanctions, embargoes and restrictions. To capture the rare and legitimate occasions when territorial considerations are relevant to a procurement or investment decision, the Bill provides for a number of exceptions to its provisions. For example, the Bill will not prevent public bodies taking into account territorial considerations for reasons such as national security, labour-related misconduct, and legitimate business and financial considerations. It has been drafted to ensure that it does not have a chilling effect on investments or prevent fund managers being able to assess the political risk of investments.

The Bill will work in harmony with the Procurement Act and will support it in better tailoring the procurement framework to our country’s needs. This Bill will in no way hinder our ability, under that Act, to exclude suppliers where necessary, including where there is evidence that a supplier is involved in modern slavery practices. Public bodies covered by the Procurement Act can therefore be confident that they will be free to decide which suppliers are eligible to bid and which is the best bid to meet their requirements, taking into account all relevant factors. However, they must not base such decisions on territorial considerations in a way that indicates political or moral disapproval of foreign state conduct.

The Bill has been drafted so as not to interfere with any individuals’ or bodies’ rights under existing human rights legislation, including the European Convention on Human Rights. The Government are committed to protecting freedom of speech and are not restricting any person’s or private organisation’s right to free speech. This applies to all in their individual capacities as elected officials, and this distinction has been made clear in the Bill’s Explanatory Notes. The Bill will apply only to decisions by a public body related to its investment and procurement functions. It will not interfere with any person’s or private organisation’s rights to express a view or to protest. Accordingly, I have signed a statement of compatibility with the European Convention on Human Rights.

On the type of public bodies that are covered by the Bill, they include the devolved authorities, local authorities, local government pension schemes, universities, government departments and agencies, publicly funded schools, and cultural institutions, such as museums and theatres, which receive significant public funding. The Bill will apply to public bodies across the country. It will cover bodies in Scotland, Wales and Northern Ireland, including devolved bodies with wholly or mainly devolved functions, as well as those with wholly reserved functions. As foreign affairs is a reserved matter, we will not seek legislative consent from the devolved assemblies to apply the Bill’s provisions to devolved bodies.

Moving on to the countries and territories covered by the Bill’s provisions, I mentioned earlier that Israel is a frequent and disproportionate target of boycotts and divestment campaigns. To ensure that the Bill is effective at banning divisive behaviour, it will apply to all countries and territories, including Israel and the Occupied Palestinian Territories and occupied Golan Heights.

Another provision I wish to highlight is one that recognises the need for flexibility when there are fast-moving changes in the global landscape. The Bill includes a power to exclude a certain country or territory from the Bill’s provisions via secondary legislation. In fact, we intend to use this power to maximise our impact on Putin’s capacity to fund his war by exempting Russia and Belarus from the Bill to allow public bodies to continue to stop procurement from Russia and Belarus. This means that public bodies will be able to consider how, in line with UK foreign policy, they can further cut ties with companies backed by or linked to the Russian and Belarusian state regimes while minimising the impact on taxpayers and the delivery of public services.

At the same time, we have seen examples of public bodies making declarations to boycott and divest as far as the law allows. These are harmful even where the law does not allow boycotts and divestments and therefore such declarations ought not to be made. There is concern that recent declarations of anti-Israel boycotts, even when not implemented in practice, have driven and contributed to rising anti-Semitism. For example, in 2019, Leicester city councillors voted to boycott produce originating from the Israeli settlements in the Occupied Palestinian Territories. Similar resolutions were passed by Swansea city council in 2010 and Gwynedd Council in 2014. That is why the Bill will ban public bodies from publishing statements indicating that they intend to engage in activity prohibited by the Bill, even where there is no intention to implement.

I stress that the Bill will apply only to public bodies carrying out public activity. Therefore, it will not prohibit individuals such as elected officials from speaking in favour of a boycott or divestment policy. I understand that some are concerned about how elected officials could differentiate between individuals’ statements that are caught or not caught by the prohibition. I should explain that councillors could place their authority in breach of the ban only if they were making a statement of intent to boycott on behalf of their authority. The Bill will not restrict representatives, including council leaders, from expressing their support for a boycott in a debate or on their personal social media. The Government are entirely committed to protecting free speech, and it is not our policy to restrict what individuals can say. Accordingly, I have signed a statement of compatibility of the Bill with the European Convention on Human Rights.

To ensure that the Bill is effective, we have provided for an enforcement regime that will apply to all public bodies captured by the Bill, UK-wide. The regime gives Ministers and designated regulators the power to issue compliance notices and to investigate and fine public bodies where there is evidence that they have breached the ban. This will be at minimal cost to taxpayers, and we will work closely with regulators to ensure that it does not place any unnecessary burdens on them. We will make secondary legislation setting out factors to be considered or not to be considered in determining the appropriate fine. Public bodies that do not follow the law will also be open to judicial review.

This legislation honours the promise we made to the electorate. It will ensure consistency in the UK’s foreign policy agenda, support public bodies to remain focused on their core duties, and prevent divisive campaigns that target particular sectors of our society to the detriment of our wider community spirit and cohesion. I look forward to working across the House to deliver this important legislation. I beg to move.

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[Baroness Neville-Rolfe (Con)]

My Lords, I thank all those who have contributed to today’s debate in support of the Bill, including my noble friends Lady Noakes and Lord Wolfson of Tredegar, the noble Baroness, Lady Deech, and the noble Lords, Lord Stevens of Birmingham and Lord Verdirame. I hope to convince many more noble Lords to do the same during our Committee discussions. Valuable contributions have been made today from all sides of the House. I would like to address the main themes of what has been a hotly contested debate and some of the questions raised by noble Lords.

Anti-Semitism is often referred to as the world’s oldest hatred; unfortunately, it is still very much alive. Since the 7 October attacks, we have seen a surge in anti-Semitic incidents in the UK. The Community Security Trust recorded its highest-ever total of anti-Semitic incidents in 2023, and 66% of these incidents occurred after 7 October. Many British Jews are understandably scared. Some Jewish schools in London even temporarily closed their doors over security fears.

Now more than ever, the Government should be taking steps to stop behaviour that could legitimise or even drive anti-Semitism. This is what the Bill does. The BDS movement is pernicious and has no place in our public institutions. That is why the Bill has been widely supported by the Jewish community in the UK. It has been endorsed by the Jewish Leadership Council and the Board of Deputies of British Jews.

The reasons for this were persuasively outlined by my noble friend Lord Wolfson of Tredegar, citing some telling examples from the UN, local government, supermarkets and universities. I am very grateful to him for coming to make the case against BDS, and doing it so clearly. Boycott and divestment campaigns undermine community cohesion and can confuse the Government’s foreign policy, so it is vital that we deal with this issue as we promised in the 2019 manifesto.

We have taken care to keep the scope of the Bill narrow, so that it applies only to the procurement and investment decisions of public authorities, as defined in Section 6 of the Human Rights Act 1998. Legislation brought forward in other countries on this issue, such as in some states of the United States, has gone beyond this.

I have read the report on the Bill that was prepared by the Constitution Committee and referenced by the noble Lords, Lord Collins of Highbury and Lord Shipley, and the noble Baroness, Lady Chapman, and I thank the committee for its useful contribution to this debate. I will take the opportunity to respond to some of the points that it raised, and to tackle points that have been raised during this debate.

First, concerns were raised by the noble Baronesses, Lady Chapman of Darlington and Lady Janke, and the noble Lord, Lord Browne of Ladyton, and others, about Clause 4, which prohibits public authorities from making statements indicating that they intend to boycott or divest, or would if it were legal to do so. This provision is a vital addition to the Bill. Such statements can be just as divisive as boycotts that are implemented, and have been widely condemned by Jewish groups. As expressed by the noble Lord, Lord Stevens of Birmingham, it is vital that the prohibition also applies to statements indicating that a public authority would boycott if it were legal to do so. This is because, in 2014, Leicester City Council passed a resolution saying it would boycott produce from Israeli settlements in so far as legal consideration allowed. Community cohesion was, of course, at the heart of the party’s manifesto commitment, and that is essential to fulfilling it.

I explained in my opening remarks that that provision will not prevent elected officials, such as local councillors, expressing their support for boycotts or divestment campaigns. The distinction has been made clear in the Bill’s Explanatory Notes, so it is not necessary to state that in the Bill. The Bill will restrict individuals from making these statements only when speaking on behalf of a public authority, which do not have human rights guaranteed by the European Convention on Human Rights. The clause has been drafted narrowly and will not in any way prevent public authorities making statements on foreign policy that do not express the intent to boycott or divest.

The noble Baroness, Lady Chapman of Darlington, asked what would happen if an academic expressed their support for a boycott at the same time as their university breached the ban, and how that would be investigated. An academic would be considered to be speaking on behalf of the university in the context of the Bill only if they had a role in the university’s decision- making process for public investment and procurement decisions, which I hope deals with her point.

The noble Lords, Lord Hain, Lord Boateng, Lord Davies of Brixton and Lord Oates, and the noble Baroness, Lady Bennett of Manor Castle, among others, raised their concern that this Bill would have prohibited local authorities from boycotting South Africa in the 1980s, and mentioned their own activities at the time. However, the movement to boycott South Africa was successful because of a concerted international effort led by Governments across the world. Although public authorities played a role—

[Lord Boateng (Lab)]

The Prime Minister of Great Britain at the time, Margaret Thatcher, consistently opposed boycotts in every international forum and consistently opposed the role of local government, churches, trade unions and others in extolling the virtue of boycotts. She was totally opposed to boycotts. The Minister really must take care in these assertions, because what she said simply does not bear any examination at all.

[Baroness Neville-Rolfe (Con)]

I was going to say that, although public authorities and individuals played a role, it was by acting in concert with the UK Government that we were able to pressure the South African Government—

[Lord Boateng (Lab)]

The UK Government consistently opposed local authorities. It is simply not true to say that the GLC or any other local authority acted in concert with Margaret Thatcher’s Government. That is nonsense.

[Baroness Neville-Rolfe (Con)]

We will move on. Obviously, I agree that the history of—

[Lord Hannay of Chiswick (CB)]

On that point, if can help the Minister, I represented this country at the United Nations at the time and what the noble Lord, Lord Boateng, says is totally accurate.

[Baroness Neville-Rolfe (Con)]

We will move on. I was just going to say that it was amazing that the change happened in South Africa. I remember visiting it in the 1990s, after the change.

[Baroness Jones of Moulsecoomb (GP)]

I am sorry to intervene, but we cannot let that go. If that was in the Minister’s notes, they are absolutely wrong. I am afraid I think an apology is necessary.

[Baroness Neville-Rolfe (Con)]

I said what I said with due advice and knowledge. I take the points that have been made.

[Lord Hain (Lab)]

I am sorry to detain the House. Not only do I endorse everything that my noble friend Boateng said, but the American Government under President Reagan also opposed boycott action. It was only the Black Caucus in Congress forcing through the loan sanctions in the late 1980s that accelerated the decline of apartheid. Virtually every Government in Europe and right across the world, including white Commonwealth countries, opposed boycott action in every respect. If the Minister’s officials are feeding her this nonsense, she should not simply repeat it.

[Baroness Neville-Rolfe (Con)]

I am grateful for the comments of the noble Lord, Lord Hain. I will certainly look into this further and perhaps we can come back to it on another occasion.

Perhaps me could move on, in the interests of time, to climate change. I would like to clarify that the Bill will ban only considerations that are country-specific. It will therefore not prevent public local authorities divesting from fossil fuels or other campaigns that are not country-specific.

The Bill will not prevent public authorities accounting for social value in their procurement decisions, the reform mentioned by the noble Lord, Lord Collins— of course, we worked together on moving to most advantageous tenders; that is a change that has come about. For example, authorities might structure their procurement so as to give more weight to bids that create jobs or promote animal welfare. Moreover, the Bill contains an exception to the ban for considerations that relate to environmental misconduct, as I think the noble Baroness, Lady Bennett, mentioned.

To answer the question from the noble Lord, Lord Collins, there was official-level engagement with the devolved Administrations on the Bill’s provisions before it was introduced to the other place through the common frameworks working groups process. Senior official engagement on the Bill dates back to April 2022. The Minister for this Bill in the other place, who I saw witnessing our proceedings earlier this evening, has also engaged with responsible Ministers in Scotland and Wales. We intend to engage with Ministers in Northern Ireland now that power has been restored.

The Government have never set out to legislate without consent. We formally sought consent from all the devolved legislatures. Where the legislative consent process is engaged, we always tend to legislate with the support of the devolved Administrations and the consent of the devolved Parliaments. However, as the noble Lord, Lord Stevens of Birmingham, highlighted, boycotts and divestments against foreign countries or territories are a matter of foreign policy. This Bill relates to foreign affairs and international relations, which are reserved matters, but I am sure we will come back to this point in Committee.

I turn to the Bill’s enforcement powers. I start by clarifying that the Bill does not create any new criminal offences, as suggested by the noble Baroness, Lady Janke. They are not criminal offences. Moreover, these enforcement powers are not unprecedented: the regime is based on existing enforcement regimes, such as the powers given to the Office for Students in the Higher Education and Research Act 2017. Clause 7 is a necessary addition to the Bill to ensure that enforcement authorities have the necessary information to assess whether there has been a breach of the ban. It would not make sense to implement a ban with a toothless enforcement regime but, again, I am sure that we will discuss enforcement further in Committee.

The noble Baroness, Lady Chapman of Darlington, and the noble Lords, Lord Wallace of Saltaire, Lord Willetts, Lord Hannay of Chiswick and Lord Johnson of Marylebone, questioned why the ban needs to apply to universities. This ban will ensure that any public authority, including universities in scope of the Bill performing public functions, can maintain their focus on their core purpose rather than taking partisan stances that undermine community cohesion.

It is not appropriate for those institutions to have a corporate view on a matter of foreign policy in the context of their public investment and procurement functions. That risks stifling the academic freedom of individual members of staff to take positions on foreign policy. However, I note the comments made by the noble Lords, Lord Johnson, Lord Willetts, Lord Shipley, and others on the ONS reclassification of universities. I will come back to noble Lords on this issue in Committee, once I have consulted other Ministers.

[Lord Wallace of Saltaire (LD)]

My Lords, regarding public investment and private investment, a lot of our universities have very substantial endowments. Will the Minister clarify that these are well outside the Bill’s remit? When they take decisions on investment and procurement from their private investment funds, they are acting privately and not publicly.

[Baroness Neville-Rolfe (Con)]

That is my sense, but I will obviously check where we are. I would also make it clear that things such as conference centres and so on are obviously outside the remit. I will come back to the noble Lord on the exact definition, if I may, and we can perhaps discuss it in Committee in any event.

I will now address concerns that this Bill represents a change in the UK’s foreign policy. The noble Baroness, Lady Kennedy of The Shaws, and others, will be pleased to know that the Government have been clear throughout the Bill’s passage that nothing in this Bill changes the UK’s position on Israeli settlements. They are illegal under international law, present an obstacle to peace and threaten the viability of a two-state solution. The Government continue to urge Israel to halt settlement expansion immediately.

I reassure the House that the Government’s assessment is that the Bill distinguishes between Israel and the territories it has occupied since 1967. It is therefore compliant with UN Security Council Resolution 2334. The Government believe very strongly in the importance of complying with international obligations under the UN Charter.

[Lord Oates (LD)]

Could the Minister tell us how the Bill distinguishes this, because the clause applies to them all equally? Could she set that out?

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[Baroness Neville-Rolfe (Con)]

The instructions for the drafting were to ensure the distinction and compliance. The Bill sets these out individually and I understand that it is compliant. The Government believe very strongly in the importance of compliance.

[Baroness Blackstone (Lab)]

The Minister says it is her understanding that this applies. I think her understanding is inadequate on this issue because there is nothing in this Bill that makes a clear distinction between the Occupied Territories and Israel itself. Perhaps she could come back to the House, or write to us all, when she has clarified this and set out exactly where this distinction is made.

[Baroness Neville-Rolfe (Con)]

I would be happy to do that and to discuss these clauses in Committee, in the usual way. The Bill does not break international law and will not compel any public authority—

[Baroness Blackstone (Lab)]

This is not just a matter of waiting for Committee; this is a matter of clearing up something very fundamental following questions that have been raised at Second Reading.

[Baroness Neville-Rolfe (Con)]

I made it clear that it is compliant. I will write a letter setting that out in the coming days.

As many noble Lords have said, there has been a rising problem of anti-Semitism since 7 October. I believe we now need this Bill all the more and that it is important to protect community cohesion.

I thank the noble and learned Lord, Lord Etherton, for his kind remarks and his helpful discussion on his concerns with the exception to the ban for considerations that a public body deems relevant to international law. This exception is necessary to ensure that public authorities are not forced to make a decision which could put the UK in breach of its obligations under international law. Public authorities cannot have their own subjective views on what constitutes a breach of international law. They must reasonably consider the decision relevant to the UK’s obligations under international law.

I now turn to China, as the noble Lord, Lord Wallace of Saltaire, and the noble Baroness, Lady Janke, raised the matter. The Procurement Act, which we worked on together, will further strengthen our approach to exclude suppliers where there is clear evidence of the involvement of forced labour or other modern slavery practices. This Bill will not prevent public bodies conducting due diligence and considering the location of suppliers when assessing modern slavery risk and will not prevent public bodies adhering to modern slavery guidelines. We will continue to keep our policy response under review. The Bill’s power to exempt a particular country or territory from its provisions will allow the scope of the Bill to evolve in line with the UK Government’s foreign policy.

Additionally, concerns have been raised around how the Bill will impact the ability of public authorities to protect against human rights abuses. It is the Government’s view that allowing for blanket exclusions of suppliers because they are based in a particular country, for an undisclosed period, is disproportionate and unfair on suppliers from those countries which operate fairly and ethically. However, I can assure Members of the House that the Bill will not prevent public authorities disregarding suppliers involved in human rights abuses on a non-country specific basis. Public bodies should not be pursuing country-specific campaigns.

[Lord Hendy (Lab)]

Can the Minister explain how that works? If a public authority decided that it would not trade with any supplier which banned trade unions or the right to strike, and, subsequently, a tender came in from China, could it or could it not, under the Bill, decide not to accept such a tender?

[Baroness Neville-Rolfe (Con)]

I do not entirely understand the question, but I am happy to research that and come back. The basic point is that public bodies should not be pursuing country-specific campaigns, as foreign policy is a matter for the UK Government alone—but obviously we need to understand the details in the supply chain.

Additionally, the Bill contains an exception to the ban for various considerations where the Government have assessed it appropriate for public authorities to make territorial considerations influenced by moral or political disapproval of foreign state conduct, including considerations relevant to labour market misconduct, which was a concern of the noble Lord.

Bodies that administer the Local Government Pension Scheme are captured by the definition of “public authorities” in Section 6 of the Human Rights Act 1998, and it is therefore appropriate for that decision to be captured. For example, a UN special rapporteur wrote to the LGPS in November 2021 demanding divestment from a number of Israeli companies, and the demand cited its ability to play a “transformational role”. I think we can agree that the role of local authorities is to manage the assets to deliver benefits to members.

The noble Baroness, Lady Young of Old Scone, asked whether the pension fund Nest and the PPF are in scope of the Bill. The only pension funds the Bill will apply to are those in the Local Government Pension Scheme, so they are not within scope.

There was a long conversation about the application of the Bill—which bodies it applies to. It will apply to public authorities, as defined in Section 6 of the Human Rights Act 1998. This definition has been in statute for 25 years and sets the scope for the application of fundamental legislation.

Indicative factors that were relevant to judges’ previous decisions on the issue include the body receiving a significant amount of public funding, the body carrying out acts in exercise of statutory powers and the body providing a public service. I encourage any institution that is unsure whether it is bound by Section 6 of the HRA to seek independent advice, but I have noted various questions on scope that we may come back to in Committee, because there were some useful contributions on that, including from the noble Baroness, Lady Grey-Thompson.

I clarify that the Bill’s Short Title provides a general indication of its subject matter, and it is clear that it applies only to public authorities, as defined in Section 6 of the Human Rights Act.

This legislation delivers an important manifesto commitment. It will ensure that the UK has a consistent foreign policy approach and speaks with one voice internationally. I have not had time to answer every point, but I have been listening carefully. I look forward to working with noble Lords throughout the passage of the Bill to deliver this important legislation and to continue to engage on the various knotty and important issues that have been raised today. I commend the Bill to the House.

Bill read a second time.

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Moved by

[Baroness Neville-Rolfe]

That the bill be committed to a Committee of the Whole House, and that it be an instruction to the Committee of the Whole House that they consider the bill in the following order:

Clauses 1 to 3, Schedule, Clauses 4 to 17, Title.

Motion agreed.